Canadian Housing Bubblehttp://www.businessinsider.com/category/canadian-housing-bubble
en-usFri, 09 Dec 2016 23:53:05 -0500Fri, 09 Dec 2016 23:53:05 -0500The latest news on Canadian Housing Bubble from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/liar-loans-pop-up-canada-housing-bubble-2015-7'Liar loans' are popping up in Canada's housing bubblehttp://www.businessinsider.com/liar-loans-pop-up-canada-housing-bubble-2015-7
Fri, 31 Jul 2015 17:42:00 -0400Wolf Richter
<p><img style="float:right;" src="http://static3.businessinsider.com/image/55bb688a2acae7a6098bba94-4992-3744/4518433803_4c087bef52_o.jpg" alt="bubble bursting" data-mce-source="Duncan Rawlinson/Flickr" /></p><p>For a long time, the conservative mortgage lending standards in Canada, including a slew of new ones since 2008, have been touted as one of the reasons why Canada&rsquo;s magnificent housing bubble, when it implodes, will not take down the financial system, unlike the US housing bubble, which terminated in the Financial Crisis.</p>
<p>Canada is different. Regulators are on top of it. There are strict down payment requirements. Mortgages are full-recourse, so strung-out borrowers couldn&rsquo;t just mail in their keys and walk away, as they did in the US. And yada-yada-yada.</p>
<p>But Wednesday afterhours, Home Capital Group, Canada&rsquo;s largest non-bank mortgage lender, threw a monkey wrench into this theory.</p>
<p>Through its subsidiary, Home Trust, the company focuses on &ldquo;alternative&rdquo; mortgages: high-profit mortgages to risky borrowers with dented credit or unreliable incomes who don&rsquo;t qualify for mortgage insurance and were turned down by the banks. They include subprime borrowers.</p>
<p>So it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September: &ldquo;falsification of income information.&rdquo; Liar loans.</p>
<p>Liar loans had been the scourge of the US housing bust. Lenders were either actively involved or blissfully closed their eyes. And everyone made a ton of money.</p>
<p>So Home Capital <a href="http://www.newswire.ca/en/story/1577463/home-capital-reports-q2-earnings" target="_blank">revealed</a> that it has suspended &ldquo;during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers,&rdquo; who&rsquo;d together originated nearly C$1 billion in single-family residential mortgages in 2014. That&rsquo;s 5.3% of the company&rsquo;s total outstanding loan assets, and 12.5% of its total single-family mortgage originations in 2014.</p>
<p>That&rsquo;s a big chunk. The company, however,&nbsp;didn&rsquo;t disclose why it took so long to disclose this.</p>
<p>It said an &ldquo;external source&rdquo; had warned it about income falsification on mortgage applications submitted by a number of brokers. Its investigation did not find any evidence of falsified credit scores or property values, it said.</p>
<p>It&rsquo;s not hard for a lender to require income verification. Not requiring it is precisely what US lenders had done before the Financial Crisis. Add a little encouragement from a broker, and that&rsquo;s how you get perfect liar loans.</p>
<p>Home Capital had already announced on July 10 (Friday afterhours!) that in Q2, originations of high-margin uninsured mortgages had plunged 16% and originations of lower-margin insured single-family mortgages had plummeted 55% because it had axed some brokers. Its shares plunged 20% the following Monday and another 4% the next day [read&hellip; <a href="http://wolfstreet.com/2015/07/15/largest-alternative-subprime-mortgage-lender-in-canada-plunges-denies-systemic-problem-in-housing-market-home-capital-group-hcg/"><u>Largest &ldquo;Alternative&rdquo; Mortgage Lender in Canada Plunges, Denies &ldquo;Systemic Problem&rdquo; in Housing Market</u></a>].</p>
<p><img class="float_left" src="http://static4.businessinsider.com/image/508a975deab8ea833100001b-620-465/house-89.jpg" alt="house for sale, for sale house " data-mce-source="Flickr / ayearineurope" data-link="http://www.flickr.com/photos/ayearineurope/185154520/" />At the time, HCG was the fourth most shorted stock in Canada. By July 29, the day before the current announcement, HCG had risen to the <a href="https://twitter.com/jshmuel/status/626083279712579584"><u>second most shorted</u></a> stock. Today, massive short-covering set in, and shares soared 13%, but remain 42% below where they&rsquo;d been during the halcyon days last November.</p>
<p>&ldquo;Everyone had their ideas about what transpired in the past six months; this corroborates some suspicions but dispels some others,&rdquo; Shubha Khan, an analyst at National Bank Financial told the <a href="http://business.financialpost.com/investing/home-capital-group-inc-says-45-brokers-suspended-after-discovery-of-falsified-income"><u>Financial Post</u></a>, adding &ndash; with Canadian understatement &ndash; that there were &ldquo;still some questions.&rdquo;</p>
<p>Among them, whether these insured liar loans would continue to be insured; and whether this was an isolated problem, rather than an industry issue in the Canadian housing market. In other words, is it just the tip of the iceberg?</p>
<p>Housing bubbles are money generators. Temptations are huge. Falsifying mortgage applications is easy if no one checks them. It&rsquo;s a mad scramble to extract as much money as possible for as long as possible &ndash; but with a devastating aftermath.</p>
<p>Now liar loans are coming out of the Canadian woodwork. The much touted down-payment requirements in Canada have already fallen apart. Don&rsquo;t have the money for even 5% down? Solutions are <a href="https://www.linkedin.com/pulse/borrowed-down-payment-your-purchase-canada-mortgage-financial-group"><u>openly</u></a> promoted, for example:</p>
<blockquote>
<p>It is not a problem anymore!!! Canada Mortgage &amp; Financial Group (CMFG) has a new product that now allows you to borrow your down payment from any source&hellip;. The only amount you need to show on your own is 1.5% of the purchase price&hellip;.</p>
</blockquote>
<p>With regulators breathing softly down their necks, banks might have become more careful in lending to people to buy homes that are among the most overpriced in the world. What has that accomplished? The rise of alternative lenders in the shadow banking system. They&rsquo;re not subject to the same regulations as banks.</p>
<p>&ldquo;There&rsquo;s a lot more that can be hidden from the public, things that are not right could not be noticed early on,&rdquo; Michael Dolega, a senior economist at TD Economics, told the<a href="http://www.huffingtonpost.ca/2015/07/28/shadow-mortgage-market-canada_n_7882216.html"><u>Huffington Post</u></a> of Canada. &ldquo;The quality is slipping, and it&rsquo;s far more questionable for some of these smaller lenders, but at the same time I think it&rsquo;s still better than it was in the U.S., when it went south pretty quickly.&rdquo;</p>
<p>Yes, this time it&rsquo;s different.</p>
<p>But the patterns are crystallizing: Home Capital Group with liar loans on its books, CMFG with ultra-low down-payment loans on its books&hellip;. In banking, bad deals are made in good times.</p>
<p>Even the Bank of Canada, in its most recent <a href="http://www.bankofcanada.ca/wp-content/uploads/2015/06/fsr-june15-christensen.pdf"><u>Financial System Review</u></a> in June, fretted over the risks in the shadow banking system due to its &ldquo;less regulated nature&rdquo; and outright &ldquo;opacity,&rdquo; and considered it a &ldquo;particularly important vulnerability&rdquo; to financial stability. While the sector is still relatively small, it would impact the overall economy, it said.</p>
<p>But it&rsquo;s not so small anymore &ndash; estimated at 10% of Canada&rsquo;s mortgage market and growing rapidly: A report by CIBC (Canadian Imperial Bank of Commerce), cited by the Huffington Post, found that lending by alternative lenders had <em>doubled</em> since 2012, and as of the Q3 last year, was still growing 20% year-over-year.</p>
<p>This comes at the worst possible time for Canada. The economy likely&nbsp;shrank in the first half. Hence, the <a href="http://www.conferenceboard.ca/press/newsrelease/15-07-29/conference_board_of_canada_further_downgrades_canada_s_growth_forecast.aspx"><u>Conference Board of Canada</u></a> just downgraded growth to 1.6% in 2015, worst since 2009. It sees some deep problems, after a 15.5% plunge in business investment in Q1:</p>
<blockquote>
<p>Oil and gas firms are expected to chop their investment by almost one-third&hellip;. Outside the energy sector, firms remain hesitant to invest. Purchases of machinery and equipment suffered a substantial decline in the first quarter of the year, and a decline in building permits suggests a downturn in commercial construction in 2015. Overall, business investment will drop by close to 7% this year.</p>
<p>Household spending is also expected to weaken, despite savings for consumers at the gas pump and federal tax cuts. Soft employment growth, weak wage gains, high level of household debt and job losses in oil producing provinces will combine to limit growth in consumer spending to 2.1% in 2015.</p>
</blockquote>
<p>That would be the optimistic scenario. It assumes that the magnificent housing bubble can be maintained; but all bets are off if it takes liar loans, among other underwriting schemes,&nbsp;to maintain it. And when the housing bubble deflates, all these schemes that are forgiven as long as prices rise will turn into an unappetizing mess.</p><p><a href="http://www.businessinsider.com/liar-loans-pop-up-canada-housing-bubble-2015-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/why-boeing-747-front-hump-2016-11">Here's why Boeing 747s have a giant hump in the front</a></p> http://www.businessinsider.com/bearish-charts-on-the-canadian-economy-2013-5Canada's Economy Is Entering A World Of Hurt [CHARTS]http://www.businessinsider.com/bearish-charts-on-the-canadian-economy-2013-5
Thu, 16 May 2013 05:34:00 -0400Rob Wile
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5193f5c26bb3f70111000000-400-/rtxdrm7.jpg" border="0" alt="hockey pain canada" width="400" /></p><p>Economists have been debating <a href="http://www.businessinsider.com/no-canadian-housing-bubble-2013-4">whether Canada's housing market was in a bubble and when that bubble would burst</a>.</p>
<p>In a new report, <a href="http://pacificapartners.ca/blog/2013/05/14/canada-us-real-estate-chartbook/#City_Summaries">British Columbia-based Pacifica Partners Capital Management asserts</a> that question is missing some much scarier stuff going on up north.</p>
<p>Yes, housing is now in decline after largely avoiding the 2008 shock, they say. But everything else has also been going haywire<span>: unemployment, credit, stocks, etc.&nbsp;</span></p>
<p><span>That is all the more remarkable, they argue, because Canada emerged from the 2008 crisis appearing a paragon of stability in the world.</span></p>
<p><span>Pacifica quotes Horace to sum up the situation:&nbsp;</span><span>"Many shall be restored that are now fallen and many shall fall that are now in honor</span><span>." </span></p>
<p><span>"A pronounced shift in both Canadian and US economies has taken place," write Pacifica's analysts. "The Canadian economy, once the envy of Americans, Europeans, and others, is now widely viewed as a commodity dependent, &ldquo;one trick pony&rdquo;.&nbsp;</span></p>
<p><a href="http://pacificapartners.ca/blog/2013/05/14/canada-us-real-estate-chartbook/#City_Summaries">In a series of charts</a><span style="line-height: 1.5em;">&nbsp;we've reproduced here, Pacifica shows how a "mean reversion" is taking place in North America, with the U.S. economy recovering while Canada's is for a world of hurt.</span></p><h3>Home prices in all major Canadian markets are way off all-time highs.</h3>
<img src="http://static4.businessinsider.com/image/5193d83a69bedd2a11000012-400-300/home-prices-in-all-major-canadian-markets-are-way-off-all-time-highs.jpg" alt="" />
<p><p><span>Vancouver, Toronto, and Montreal are barely into the first year of "a potential lengthy period of price weakness."&nbsp;</span></p>
<p><em style="line-height: 1.5em;">Source: <a href="http://pacificapartners.ca/blog/2013/05/14/canada-us-real-estate-chartbook/#.UZPe6yt4ZPO">Pacifica Partners</a></em></p></p>
<br/><br/><h3>In Vancouver, considered Canada’s "bubbliest" city, average single family home sale prices are down over 14% from their highs.</h3>
<img src="http://static4.businessinsider.com/image/5193d83969beddd213000019-400-300/in-vancouver-considered-canadas-bubbliest-city-average-single-family-home-sale-prices-are-down-over-14-from-their-highs.jpg" alt="" />
<p><p><span>And average condo prices are close to 2007 levels.</span>&nbsp;</p>
<p><span><em>Source:&nbsp;<a href="http://pacificapartners.ca/blog/2013/05/14/canada-us-real-estate-chartbook/#.UZPe6yt4ZPO">Pacifica Partners</a></em></span></p></p>
<br/><br/><h3>Canadian home starts are now declining at the fastest rate since the financial crisis.</h3>
<img src="http://static2.businessinsider.com/image/5193d8376bb3f7e857000008-400-300/canadian-home-starts-are-now-declining-at-the-fastest-rate-since-the-financial-crisis.jpg" alt="" />
<p><p>This is the indicator that gives Pacifica most pause. They write: "<span>With 20% of Canadian GDP directly involved in construction and real estate activities, a continued slowdown in housing-starts will have a marked impact on the consumer behavior and ripple through other consumer sensitive areas of the economy, including retail sales, financial services, transportation, and warehousing."</span></p>
<p><em>Source:&nbsp;<a href="http://pacificapartners.ca/blog/2013/05/14/canada-us-real-estate-chartbook/#.UZPe6yt4ZPO">Pacifica Partners</a></em></p></p>
<br/><br/><a href="http://www.businessinsider.com/bearish-charts-on-the-canadian-economy-2013-5#canadian-leading-economic-indicators-are-now-falling-behind-american-ones-by-the-widest-margin-in-over-two-decades-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/no-canadian-housing-bubble-2013-4Five Reasons Why You Don't Need To Worry About A Canadian Housing Bubblehttp://www.businessinsider.com/no-canadian-housing-bubble-2013-4
Mon, 29 Apr 2013 17:34:55 -0400Joshua Brown
<p>This weekend I shared this Globe &amp; Mail story about the hedge fund manager <a href="http://www.theglobeandmail.com/globe-investor/meet-the-hedge-fund-founder-whos-betting-against-canadas-economy/article11585150/" target="_blank">betting big against Canada</a>, specifically the Canadian banking sector, housing market and the country's currency. He sees a crisis coming for the real estate market up north that will wreck the economy.</p>
<p>It's an interesting view, but one that I think will be wrong.</p>
<p>Five quick reasons why:</p>
<p>1. A lot of the money fueling the boom is coming from <strong>Asians</strong> (especially from China) who want to get some assets outside their country. Real estate is how they're doing it. A new boom in China fuels more of this as there is more money to be invested. A crash in China fuels it even further as the newly minted millionaires and billionaires seek to protect even more of their wealth from local conditions. It's virtually guaranteed to continue.</p>
<p>2. The rest of the money is coming from <strong>gold mining, oil drilling and nat gas discovery</strong>. Gold may be in or out of fashion, but its been a Canadian mainstay industry since the flag was first planted. It is&nbsp;endogenous&nbsp;to their culture and way of life. Oil and gas prices rise or fall but the underlying need and demand really don't. In short, the prices of materials fluctuate but its not likely that activity in finding and producing these materials will ever stay down for long.</p>
<p>3. Have you met any <strong>Canadians</strong>? Outside of hockey arenas and beaver-trapping blinds, they tend to be well-educated, clean, smart, well-mannered, fastidious and responsible. Yes, this is a stereotype, but most stereotypes contain a kernel of truth, it's how they get started to begin with. Look at the loan-to-value rates in Canadian housing, look at the percentages of equity being put down, look at the sheer amount of activity taking place with cash on the barrel head and no debt. It's hard to call this a mania or a free-for-all.</p>
<p>4. Canada's housing supply is mostly <strong>igloos</strong>, which will eventually melt, thus preventing massive overstock in the market place. This factor should keep pricing somewhat stable over time.</p>
<p>5. I don't have a fifth, it's been a long day, add your own below.</p><p><a href="http://www.businessinsider.com/no-canadian-housing-bubble-2013-4#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/home-sales-in-canada-have-plummeted-2013-1Canada Continues To Report Horrific Home Sales Numbershttp://www.businessinsider.com/home-sales-in-canada-have-plummeted-2013-1
Thu, 24 Jan 2013 17:08:25 -0500Lucas Kawa
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5101958decad04ce07000009-400-/fort-mcmurray-alberta-canada.jpg" border="0" alt="Fort McMurray Alberta Canada" width="400" /></p><p>Canada continues to report disturbing stats about its housing market.</p>
<p>December&rsquo;s home sales in the two hottest Canadian housing markets indicate that a large crisis may be looming up north.</p>
<p>Compared to December 2011, <a href="http://www.canadianmortgagesinc.ca/index.php/toronto-sales-down-in-december-prices-up-yoy/">home sales are down</a> 19.5 percent in Toronto and 31.1 percent in Vancouver, two of the three biggest cities in Canada.</p>
<p>Nationally, home sales only fell by 4 percent over the course of the 2012.</p>
<p>The stricter rules on mortgages put into place in the summer of 2012 to cool down the market appear to be working.</p>
<p>In &ldquo;<a href="http://www.canadianmortgagesinc.ca/index.php/why-havent-we-crashed-yet/">Why Haven&rsquo;t We Crashed Yet</a>&rdquo;, Kate Beswick from <a href="http://www.canadianmortgagesinc.ca/">Canadian Mortgages Inc.</a> reports that the impending crash everyone&rsquo;s expecting is won't occur "until some dramatic trigger happens that really delivers a blow to the market. And that blow is likely not to come in the form of interest rate hikes.&rdquo;</p>
<p>The <a href="http://www.businessinsider.com/blackboard/bank-of-canada" class="hidden_link">Bank of Canada</a> recently chose to put off an interest rate increase, and <a href="http://www.bankofcanada.ca/2013/01/press-releases/fad-press-release-2013-01-23/">maintained its overnight rate at 1 percent</a>.</p>
<p>The argument is simple: a crash needs a cause. Benjamin Tal, deputy chief economist at CIBC, argues that as it stands, the Canadian housing market <a href="http://www.canadianmortgagesinc.ca/index.php/why-havent-we-crashed-yet/">will likely stagnate</a> unless unemployment or interest rates surge &ndash; which would leave people unable to afford their homes.</p>
<p>Something housing guru <a href="http://www.businessinsider.com/robert-shiller-canadian-housing-bubble-2012-9">Robert Shiller said back in September </a>still rings true today:&nbsp; "I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S."</p>
<p>Due to the lack of a trigger, this softening and decline in home values will take place over an extended period of time.</p>
<p>It&rsquo;s not likely that this bubble will suddenly pop. Rather, if you listen to Shiller, a more apt comparison would be the slow deflation of a blow-up mattress.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/canada-housing-market-2012-11" >Here's What's Happening In North America's #1 Housing Bubble</a></strong></p>
<p><a href="http://www.businessinsider.com/home-sales-in-canada-have-plummeted-2013-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/trends-in-toronto-housing-prices-2012-12TORONTO: The Epicenter Of The Gigantic Canadian Housing Bubble [Infographic]http://www.businessinsider.com/trends-in-toronto-housing-prices-2012-12
Tue, 11 Dec 2012 10:40:00 -0500Lucas Kawa
<p>As home prices in Canada continue to trend upwards, there's been much discussion about whether<a href="http://www.businessinsider.com/canada-housing-market-2012-11"> this country's housing market is a bubble</a> about to burst. <a href="http://www.businessinsider.com/canadian-housing-bubble-2012-12">Recent numbers out of Vancouver</a> suggest one of the nation's biggest and hottest markets is cooling down rapidly.</p>
<p>To help get a handle on housing Canada's other massive metropolitan area, <a href="http://www.canadianmortgagesinc.ca/">Canadian Mortgages Inc.</a> has put together this great infographic on the state of Toronto's housing market:</p>
<p><img src="http://static6.businessinsider.com/image/50c740baecad041333000000-610-/toronto_housing_prices.jpg" border="0" alt="Toronto Housing Market Infographic" width="610" /></p>
<p><em>Many thanks to Danielle Dalkie and the team at <a href="http://www.canadianmortgagesinc.ca/">Canadian Mortgages Inc</a>. for giving us permission to use this infographic.</em></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/worst-housing-markets-in-the-world-2012-12" >The 12 Worst Housing Markets In The World</a></strong></p>
<p><a href="http://www.businessinsider.com/trends-in-toronto-housing-prices-2012-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/canadian-housing-bubble-2012-12Home Sales In Vancouver Are Plummetinghttp://www.businessinsider.com/canadian-housing-bubble-2012-12
Wed, 05 Dec 2012 13:59:00 -0500Lucas Kawa
<p><img style="float:right;" src="http://static3.businessinsider.com/image/50be79f369bedda03d00000a-400-/whistler-vancouver-1465-million-home.jpg" border="0" alt="Whistler vancouver $14.65 million home" width="400" /></p><p>Home prices had been on a <a href="http://www.businessinsider.com/canada-housing-market-2012-11">tear in Canada</a> after a brief dip in 2009 due to the financial crisis.</p>
<p>However, more recent data shows the Canadian housing market is hitting the skids.</p>
<p>According to the Real Estate Board of Greater Vancouver, November home sales in the Vancouver region were <a href="http://news.yahoo.com/november-home-sales-vancouver-fall-28-6-per-211613658.html?utm_source=twitterfeed&amp;utm_medium=twitter">down 28.6 percent year over year</a>, and down 12.7 percent from the previous month. Interestingly enough, there were 15,689 residential properties listed -- an increase of over 13 percent from November 2011.</p>
<p>More people are putting their homes up for sale, but fewer are finding buyers -- which points to softening in one of Canada's most valuable real estate markets.</p>
<p>The value of homes has remained relatively flat. The Multiple Listing Service for the Greater Vancouver area was down only 1.7 percent from a year ago.</p>
<p>Putting all this together, it's possible the Canadian housing bubble may very well be popping right before our eyes.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/canada-housing-market-2012-11" >Here's What's Happening In The Canadian Housing Bubble</a></strong></p>
<p><a href="http://www.businessinsider.com/canadian-housing-bubble-2012-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/canada-housing-market-2012-11Here's What's Happening In North America's #1 Housing Bubblehttp://www.businessinsider.com/canada-housing-market-2012-11
Wed, 28 Nov 2012 13:45:00 -0500Mamta Badkar and Lucas Kawa
<p><img style="float:right;" src="http://static1.businessinsider.com/image/50b50ed9eab8ea2b3500000e-900-675/ottawa-skyline.jpg?maxX=610" border="0" alt="ottawa skyline" width="610" /></p><p>Canadian home prices mirrored those in the U.S. as they surged from 2001 to 2008, then plunged during the global financial crisis.&nbsp; Since 2009, however, they have once again been on a tear as U.S. home price have remained subdued.</p>
<p>The person most responsible for the movement in Canadian home prices is probably <a href="http://www.businessinsider.com/blackboard/mark-carney" class="hidden_link">Mark Carney</a>, the now former head of the Bank Of Canada who was <a href="http://www.businessinsider.com/rosenberg-mark-carney-wayne-gretsky-2012-11">recently poached by the Bank of England</a>.</p>
<p><a href="http://www.businessinsider.com/canada-housing-market-2012-11#2001-after-years-of-moving-sideways-home-prices-took-off-1"><strong>Click here to see the Canadian housing market &gt;</strong></a></p>
<p>Carney has been praised for embarking on <a href="http://blogs.wsj.com/source/2012/11/27/mark-carney-the-u-k-s-savior-maybe-not/">aggressive easy monetary policy</a> in his effort to keep Canada from sinking with the rest of the global economy.</p>
<p>However, some are now concerned that his policies are reinflating a massive housing bubble.&nbsp; Capital Economics warned that <a href="http://www.businessinsider.com/capital-economics-canada-housing-forecast-2012-10">Canadian home prices will fall 25 percent from here</a>, and <a href="http://www.businessinsider.com/robert-shiller-canadian-housing-bubble-2012-9">Robert Shiller</a> warned that Canada looked like the slow-motion version of the U.S.housing bust.</p>
<p>Recent <a href="http://www.reuters.com/article/2012/11/21/canada-economy-housing-idUSL1E8ML1HC20121121">home price data</a> shows that regulations have cooled the housing market a bit, causing some to argue that <a href="http://www.businessinsider.com/canadas-housing-market-wont-share-americas-fate-2012-11#">Canada's housing market is nothing like America's</a>.</p>
<p>What follows is a review of how the Canadian housing market has evolved since 2001.&nbsp; It should be noted that Carney took over the <a href="http://www.businessinsider.com/blackboard/bank-of-canada" class="hidden_link">Bank of Canada</a> in 2007.</p><h3>2001: After years of moving sideways, home prices took off</h3>
<img src="http://static2.businessinsider.com/image/50b3db54eab8eafe78000035-400-300/2001-after-years-of-moving-sideways-home-prices-took-off.jpg" alt="" />
<p><p><em>Source: <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;ved=0CDAQFjAA&amp;url=https%3A%2F%2Fs3.amazonaws.com%2Fpolicyalternatives.ca%2Fsites%2Fdefault%2Ffiles%2Fuploads%2Fpublications%2FNational%2BOffice%2F2010%2F08%2FCanadas_Housing_Bubble.pdf&amp;ei=x9SzUK7YIaTL0AGiiICYDA&amp;usg=AFQjCNEaCODqLerjYSkmB3XqBsonHPaLcw">Canadian Center For Policy Alternatives</a></em></p></p>
<br/><br/><h3>2001: 2016 Nita Lane in Whistler, B.C. sells for a cool $10 million -- setting a Canadian record for the highest price ever paid for a residential home.</h3>
<img src="http://static4.businessinsider.com/image/50b51aafeab8ea6a4e00000f-400-300/2001-2016-nita-lane-in-whistler-bc-sells-for-a-cool-10-million-setting-a-canadian-record-for-the-highest-price-ever-paid-for-a-residential-home.jpg" alt="" />
<p><p><em>Source: <a href="http://www.greatestates.info/stats_whistler.html ">Great Estates</a></em></p></p>
<br/><br/><h3>JUNE 2005: 3552 Falcon Crescent sold for a record $11.2 million</h3>
<img src="http://static2.businessinsider.com/image/50b517a8eab8ea3348000005-400-300/june-2005-3552-falcon-crescent-sold-for-a-record-112-million.jpg" alt="" />
<p><p><em>Source: <a href="http://www.greatestates.info/stats_whistler.html ">Great Estates</a></em></p></p>
<br/><br/><a href="http://www.businessinsider.com/canada-housing-market-2012-11#q3-2006-home-prices-climbed-over-5-percent-on-the-quarter-the-highest-rate-weve-seen-in-the-past-eight-years-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/canadas-housing-market-wont-share-americas-fate-2012-11CALM DOWN: Here's Why Canada's Housing Market Will Not Experience A US-Style Crashhttp://www.businessinsider.com/canadas-housing-market-wont-share-americas-fate-2012-11
Mon, 05 Nov 2012 00:36:00 -0500Lucas Kawa
<p><img style="float:right;" src="http://static6.businessinsider.com/image/50974defeab8eae96f000019-232-272/canadian-home-price.jpg?maxX=295&amp;maxY=345" border="0" alt="canadian home price" width="295" height="345" /></p><p>Benjamin Tal, deputy chief economist of CIBC World Markets, recently <a href="http://research.cibcwm.com/economic_public/download/cw-20121030.pdf">released a report</a>&nbsp;to calm domestic and foreign investors&nbsp;who fear that <a href="http://www.businessinsider.com/canadian-jobs-housing-falling-2012-11">Canada&rsquo;s housing market is collapsing</a>.</p>
<p>He acknowledges that the persistent upward trend home prices is a reason to be nervous (see right).</p>
<p>However, he<span> notes there are substantial differences between the current state of the Canadian housing market and its American counterpart circa 2006.</span></p>
<p>Even under a worst-case scenario, a Canadian housing market crisis, wouldn't be on the same scale as the American housing crisis.</p>
<p>Tal provided four points with charts to support his thesis.</p><h3>Canada's housing market has very little speculation</h3>
<img src="http://static5.businessinsider.com/image/509404eceab8ea7c47000012-400-300/canadas-housing-market-has-very-little-speculation.jpg" alt="" />
<p><p><span>The ratio of housing starts to household formation over the past ten years is significantly lower in Canada than in pre-crash U.S.</span></p>
<p><span>"On average, over the past decade, housing starts in Canada exceeded household formation by only 10%&mdash; with most of the excess seen in cities such as Toronto and Vancouver. In the US, the gap during the decade leading to the crash was almost 80%."<br /></span></p>
<p><span>In short, t<span>he supply of houses better reflects the real demand.</span></span></p>
<p><span><span><em>Source: <a href="research.cibcwm.com/economic_public/download/cw-20121030.pdf">CIBC World Markets</a></em></span></span></p></p>
<br/><br/><h3>Borrowers have less sensitivity to interest rate spikes</h3>
<img src="http://static3.businessinsider.com/image/5094053669beddb77b000013-400-300/borrowers-have-less-sensitivity-to-interest-rate-spikes.jpg" alt="" />
<p><p><span>The share of variable rate mortgages (a mortgage without a fixed rate) in Canada has dropped substantially in the short-term, and remains lower than the percentage of VRMs in the precrash U.S. market.&nbsp;</span></p>
<p>This means that rising interest rates won&rsquo;t be accompanied by rising mortgage payments for the vast majority of Canadian borrowers, lowering the risk of default.</p>
<p><em>Source: <a href="research.cibcwm.com/economic_public/download/cw-20121030.pdf">CIBC World Markets</a></em></p></p>
<br/><br/><h3>Credit scores in Canada have improved since the recession.</h3>
<img src="http://static4.businessinsider.com/image/50941236eab8eacc63000014-400-300/credit-scores-in-canada-have-improved-since-the-recession.jpg" alt="" />
<p><p>"The distribution of the credit score in Canada has not changed dramatically in the past four years with some increase in the relative proportions of both sides of the risk spectrum. That is <strong>very different</strong> than the experience seen in the US in the four years heading into the recession. The proportion of the risky category <strong>rose by no less than ten percentage points and accounted for 22% of the market</strong>."</p>
<p><em>Source: <a href="research.cibcwm.com/economic_public/download/cw-20121030.pdf">CIBC World Markets</a></em></p></p>
<br/><br/><a href="http://www.businessinsider.com/canadas-housing-market-wont-share-americas-fate-2012-11#subprime-borrowers-account-for-a-much-smaller-share-of-canadian-mortgage-holders-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/canadian-housing-bubble-2012-10The Next Gigantic Housing Bubble That Everyone Expects To Bursthttp://www.businessinsider.com/canadian-housing-bubble-2012-10
Thu, 04 Oct 2012 12:48:00 -0400Mamta Badkar
<p><img style="float:right;" src="http://static2.businessinsider.com/image/506c2e4369beddf23c000018-590-443/vancouver.jpg?maxX=400&amp;maxY=300" border="0" alt="vancouver" width="400" height="300" /></p><p>Canada avoided many of the mistakes that the U.S. made in its housing market.&nbsp;</p>
<p>Banking regulations and lending standards have been much tighter, and that has prevented prices from getting completely out of control.</p>
<p>However, top economists including <a href="http://www.businessinsider.com/blackboard/robert-shiller" class="hidden_link">Robert Shiller</a> and <a href="http://www.businessinsider.com/blackboard/david-rosenberg" class="hidden_link">David Rosenberg</a> are increasingly sounding alarms that the Canadian housing market is the next bubble and it's about to burst.</p>
<p>Canadian home prices are up nearly 100 percent since 2000, according to <a href="http://www.europac.net/commentaries/canadian_real_estate_bubble_bubble_toil_trouble">Euro Pacific Capital.</a> And there are other characteristics that do bear some striking resemblance to America's housing boom-bust story. Moreover, this comes at a time when the nation's economic outlook has become uncertain.</p>
<p>We put together a guide to Canada's housing debacle on a national scale, and focused on Vancouver and Toronto in particular where homes have become increasingly unaffordable.</p><h3>Canadian home prices have been rising for some time other than a brief blip during the recession.</h3>
<img src="http://static6.businessinsider.com/image/506c548fecad049340000003-400-300/canadian-home-prices-have-been-rising-for-some-time-other-than-a-brief-blip-during-the-recession.jpg" alt="" />
<br/><br/><h3>Canada's homes were more unaffordable in the second quarter than their historical average.</h3>
<img src="http://static3.businessinsider.com/image/506b7366eab8ea8450000001-400-300/canadas-homes-were-more-unaffordable-in-the-second-quarter-than-their-historical-average.jpg" alt="" />
<p><p>Housing affordability in Canada climbed to 43.4 percent in the second quarter.</p>
<p>This is higher than the historical average of 39.5 percent.&nbsp;<strong>A rise in the indicator reflects a deterioration in affordability.</strong></p>
<p><em>Note: The historical average looks at home prices from 1985 on.</em></p>
<p><em>Source: <a href="http://www.rbc.com/newsroom/2012/0827-econ-housing.html">Royal Bank of Canada</a></em></p>
<p><strong><br /></strong></p></p>
<br/><br/><h3>This was the second straight quarter in which the cost of owning a home, as a percent of income, increased.</h3>
<img src="http://static3.businessinsider.com/image/506b76ea69bedd2c09000003-400-300/this-was-the-second-straight-quarter-in-which-the-cost-of-owning-a-home-as-a-percent-of-income-increased.jpg" alt="" />
<br/><br/><a href="http://www.businessinsider.com/canadian-housing-bubble-2012-10#vancouver-is-the-least-affordable-market-in-canada-and-torontos-affordability-also-worsened-for-a-second-straight-quarter-4">See the rest of the story at Business Insider</a>